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Fair Value

12 Months Ended

Nov. 30, 2020

3. Fair Value

INDUS applies the provisions of ASC 820, which establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs, when measuring fair value. The categorization of an asset or liability within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC 820 establishes three levels of inputs that may be used to measure fair value, as follows:

Level 1 applies to assets or liabilities for which there are quoted market prices in active markets for identical assets or liabilities.

Level 2 applies to assets or liabilities for which there are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, such as quoted prices for similar assets or liabilities in active markets; quoted prices for assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived

principally from, or corroborated by, observable market data. Level 2 assets and liabilities include INDUS's interest rate swap agreements (see Notes 1, 6 and 8). These inputs are readily available in public markets or can be derived from information available in publicly quoted markets, therefore, INDUS has categorized these derivative instruments as Level 2 within the fair value hierarchy. Level 2 assets at November 30, 2019 also included INDUS’s short-term investments in repurchase agreements with Webster Bank (see Note 1). These repurchase agreements were carried at their resell amounts, which approximated fair value due to their short-term nature.

Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities. As of November 30, 2020, INDUS’s consolidated balance sheet includes the Warrant liability and CVR liability related to the private placement on August 24, 2020 (see Notes 2 and 10). INDUS derived these values based on the Cox-Ross-Rubenstein option-pricing model and a Monte Carlo simulation valuation methodology, respectively. Therefore, INDUS recognized these liabilities as Level 3 within the fair value hierarchy and they will be re-measured on a recurring basis.

During fiscal 2020, INDUS did not transfer any assets or liabilities in or out of Levels 1 and 2. The following are INDUS’s financial assets and liabilities carried at fair value and measured at fair value on a recurring basis:


		November 30, 2020
		Quoted Prices in			Significant			Significant
		Active Markets for			Observable			Unobservable
		Identical Assets			Inputs			Inputs
		(Level 1)			(Level 2)			(Level 3)
Interest rate swap liabilities		$	—		$	8,962		$	—
Common stock warrant liability		$	—		$	—		$	11,550
Contingent value rights liability		$	—		$	—		$	681


		November 30, 2019
		Quoted Prices in			Significant			Significant
		Active Markets for			Observable			Unobservable
		Identical Assets			Inputs			Inputs
		(Level 1)			(Level 2)			(Level 3)
Interest rate swap liabilities		$	—		$	4,052		$	—

The carrying and estimated fair values of INDUS’s financial instruments are as follows:


		Fair Value		November 30, 2020						November 30, 2019
		Hierarchy		Carrying			Estimated			Carrying			Estimated
		Level		Value			Fair Value			Value			Fair Value
Financial assets:
Cash and cash equivalents		1		$	28,540		$	28,540		$	5,874		$	5,874
Short-term investments		2		$	—		$	—		$	1,011		$	1,011
Financial liabilities:
Mortgage loans, net of debt issuance costs		2		$	161,048		$	164,331		$	142,575		$	145,235
Revolving lines of credit		2		$	—		$	—		$	5,875		$	5,875
Interest rate swap liabilities		2		$	8,962		$	8,962		$	4,052		$	4,052
Warrant liability		3		$	11,550		$	11,550		$	—		$	—
Contingent value rights liability		3		$	681		$	681		$	—		$	—

The amounts included in the consolidated financial statements for cash and cash equivalents, short-term investments, leasing receivables from tenants and accounts payable and accrued liabilities approximate their fair values

because of the short-term maturities of these instruments. The amount included in the consolidated financial statements for the revolving lines of credit approximated their fair values because of their variable interest rates. The fair values of the mortgage loans, net of debt issuance costs, are estimated based on current rates offered to INDUS for similar debt of the same remaining maturities and, additionally, the Company considers its credit worthiness in determining the fair value of its mortgage loans. The fair values of the interest rate swaps (used for purposes other than trading) are determined based on discounted cash flow models that incorporate the cash flows of the derivatives as well as the current OIS Rate and swap curve along with other market data, taking into account current interest rates and the credit worthiness of the counterparty for assets and the credit worthiness of INDUS for liabilities.

The fair value of the Warrant liability was estimated using the Cox-Ross-Rubenstein option-pricing model. A summary of the weighted-average significant unobservable inputs (Level 3 inputs) used in determining the fair value of the Warrant liability is as follows:


			Warrant
			Liability
Expected volatility			41.87	%
Risk free interest rates			0.18	%
Expected term (in years)			2.7
Annual dividend yield			1.03	%

			Fair Value of
			Derivative
			Warrant Liability
Initial fair value at inception		$	4,915
Change in fair value			6,635
Balance at November 30, 2020		$	11,550

Although the fair value of the Warrant was $11,550 as of November 30, 2020, the maximum amount that INDUS would be required to pay if the Warrant were to be settled in cash is $2,018.

The fair value of the CVR liability was estimated using a Monte Carlo simulation valuation methodology. A summary of the weighted-average significant unobservable inputs (Level 3 inputs) used in determining the fair value of the CVR liability is as follows:


			Contingent Value
			Rights Liability
Expected volatility			59.74	%
Risk free interest rates			0.10	%
Expected term (in years)			0.7
Annual dividend yield			1.7	%

			Fair Value of
			Contingent Value
			Rights Liability
Initial fair value at inception		$	1,342
Change in fair value			(661)
Balance at November 30, 2020		$	681

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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